method for conducting an auction of a plurality of heterogeneous items

ABSTRACT

The invention provides a method for conducting an auction of a plurality of heterogeneous items. The method comprises making, by offering parties, offers to potential accepting parties for the heterogeneous items. The making begins at a specified time with at least some of the potential accepting parties and at least some of the offering parties represented by software-based agents hosted on terminals connected via a communication network. Any acceptance by any accepting party of any offer from any offering party is binding on the offering party immediately, but is not binding on the accepting party until the auction closes. The method also comprises accepting, by an accepting party, a first offer from a first offering party for the heterogeneous item only if the first offer provides a surplus of at least a minimum surplus amount for the heterogeneous item.

FIELD OF THE INVENTION

The present invention generally relates to the field of electronicbusiness and more specifically to online auctions using software-basedagents linked via a communication network.

BACKGROUND

The Internet is increasingly being used to conduct electronic business.Advertising is commonplace and many vendors use the Internet for thesale of products and services, including books and toys. Individuals useInternet-based online auction sites for selling a variety of goods thatrange from second hand books to rare collectible items.

The Internet has several advantages over the traditional media types.Firstly the reach of the Internet is much wider than any othertraditional media type available. Thus, an item advertised for sale onthe Internet is exposed to potentially more than a billion Internetusers all over the world. Secondly, the Internet offers excellent searchcapabilities to users. State of the art search engines make it possibleto type a few keywords and subsequently browse through a substantialamount of information present on the Internet that is related to thesekeywords. A user in search of a used car (e.g. a Honda Civic) may simplysubmit the phrase “for sale used Honda Civic” to a search engine toobtain a listing of used Honda Civic cars available for sale on theInternet. Thirdly, the Internet offers a relatively inexpensive way tocommunicate to users all over the world. Finally, the Internet connectedwith various public and private computer systems enables users to makeuse of software-based agents to perform many useful functions in anautomated manner.

As a result, an increasing number of virtual electronic marketplaces arebeing setup on the Internet for the sale and purchase of goods andservices. These marketplaces offer a variety of market mechanisms fornegotiating contracts between buyers and sellers. The most commonmechanisms currently used are fixed price sale, ascending price Englishauctions, descending price Dutch auctions, name-your-price andrequest-for-quotes.

In the fixed price sale mechanism, the seller publishes a fixed pricefor an item. Interested buyers may purchase the item by using an onlinepayment method, such as a credit card or CyberCash, and by supplying ashipping address.

In ascending price English auctions, the sellers list items for sale onan online Internet-based auction site. Potential buyers peruse the itemdetails and place bids on items of interest. The buyers may placeadditional bids in case of being outbid by other buyers. At close of theauction, the buyer with highest bid wins the item at the final bidprice.

In descending price Dutch auctions, sellers offer their items for salebeginning with a high initial price. A seller lowers the price of anitem if buyers show no interest in the item. The price is lowered in astepwise fashion until the seller finds a buyer for the item.

In the name-your-price mechanism, a seller supplies details of the itemfor which potential buyers can bid. After examining the details of theitem, a buyer may make a bid for securing the item. If the bid amount isacceptable to the seller, a contract is concluded and the seller shipsthe item to the buyer after receiving the payment or paymentinformation.

In the request-for-quotes mechanism, a buyer (typically a largecorporate entity or a government body) interested in purchasing an itemmakes their intent public and calls on various parties to submitquotations for the item. Interested sellers submit offers for the saleof the item and the buyer selects the best offer.

The auction model used for FCC bandwidth auctions (www.fcc.gov) iscalled the multi-round simultaneous auction model. In this model, allthe auctions start simultaneously and end simultaneously, when biddingon each of them stops. The model provides an opportunity to bid for morethan one bandwidth license simultaneously, in order to enable acombination of licenses to be won by a bidder who values thatcombination the most.

Several other auction-like mechanisms having desirable properties havebeen proposed in research literature. Demange G. et al., in “Multi-itemAuctions”, Journal of Political Economy, 1984, 94(4):863-872, describe ageneralization of ascending English auctions to multiple heterogeneousauctions. In this mechanism, each item is auctioned independently as anascending open-cry auction, but all the auctions open and closesimultaneously. The bidders place bids on items that provide a maximumsurplus. Demange et al. showed that this mechanism leads to a finalallocation that can be made substantially close to the minimumcompetitive equilibrium price. Bertsekas D. P., in “Auction Algorithmsfor Network Flow Problems: A Tutorial Introduction”, ComputationalOptimization and Applications, 1992, 1:7-66, also discusses propertiesof this auction mechanism. Bansal V. and Garg. R., in “Efficiency andPrice Discovery in Multi-item Auctions”, ACM SigEcom Exchanges, 2(1),Winter 2001, briefly discuss multi-item auctions.

Crawford V. P. and Knoer E., in “Job Matching with Heterogeneous Firmsand Workers”, Econometrica, March 1981, 49(2):437-450, describe amechanism in the context of firms and workers where workers are assignedto firms. A mechanism (called salary adjustment process) is describedthat converges to an equilibrium assignment and competitive prices(salaries). Kelso A. S. and Crawford V. P., in “Job Matching, CoalitionFormation, and Gross Substitutes”, Econometrica, November 1982,50(6):1483-1504, extend this mechanism to the case where the biddershave more general demand (called gross substitute). Gul F. andStacchetti E., in “Walrasian Equilibrium with Gross Substitutes”,Journal of Economic Theory, July 1999, 87(1):95-124, and in “The EnglishAuction with Differentiated Commodities,” Journal of Economic Theory,May 2000, 92(1):66-95, describe a similar auction procedure for genericbidder demands called gross substitutes.

Leonard H. B., in “Elicitation of Honest Preferences for the Assignmentof Individuals to Positions”, Journal of Political Economy, 1983,91:461-479, considers a sealed bid mechanism for allocating items tobidders. Vickery W., in “Counterspeculation, Auctions, and CompetitiveSealed Tenders”, Journal of Finance, 1961, 16:8-37, describes a “secondprice” sealed bid auction mechanism for a single item.

Implementation of the above-described auction mechanisms inInternet-based marketplaces has been limited. However, more traditionaland/or simpler mechanisms for selling items have been implemented invarious marketplaces. U.S. Pat. No. 5,890,138, issued to Godin et al. onMar. 30, 1999 and U.S. Pat. No. 5,835,896, issued to Fisher et al. onNov. 10, 1998, each present a method of conducting online auctions,which enables users to participate using computers connected to theauction system via a computer or communications network.

Examples of online auction web sites on the World Wide Web (WWW) includewww.auctions.yahoo.com, and www.ebay.com. The experimental auctionserver AuctionBot at the University of Michigan, Ann Arbor, USA,supports Vickrey auctions, (m+1)st-price auctions, mth-price auctions,continuous double auctions and chronological match auctions (e.ghttp://auction.eecs.umich.edu) and is described by Wurman, P. R.,Wellman M. P. and Walsh W. E. in “The Michigan Internet AuctionBot: AConfigurable Auction Server for Human and Software Agents”, Proceedingsof the 2nd International Conference on Autonomous Agents 1998,(Agents'98). Web sites such as www.amazon.com and www.walmart.com haveimplemented the fixed price sale mechanism. Web sites such aswww.priceline.com have implemented the name your price mechanism forairline tickets and other travel related services. Some of these auctionsites provide users with a capability to use very simple automatedsoftware-based agents, acting on behalf of those users, to place bids.Proxy bidding at the auction web site www.ebay.com is one such example.

In view of the foregoing, a need exists for the online implementation ofmulti-item generalization of auction mechanisms.

SUMMARY

The invention provides a method for conducting an auction of a pluralityof heterogeneous items. The method comprises making, by offeringparties, offers to potential accepting parties for the heterogeneousitems. The making begins at a specified time with at least some of thepotential accepting parties and at least some of the offering partiesrepresented by software-based agents hosted on terminals connected via acommunication network. Any acceptance by any accepting party of anyoffer from any offering party is binding on the offering partyimmediately, but is not binding on the accepting party until the auctioncloses.

The method also comprises accepting, by an accepting party, a firstoffer from a first offering party for one of the heterogeneous itemsonly if the first offer provides a surplus of at least a minimum surplusamount for the heterogeneous item. After accepting the first offer, themethod receives, by the accepting party from a second offering partydifferent from the first offering party, a subsequent offer for theheterogeneous item. The subsequent offer is different from the firstoffer and provides an increased surplus for the heterogeneous itemcompared to the surplus provided by the first offer.

The method also comprises accepting, by the accepting party, thesubsequent offer; and rejecting, by the accepting party, the first offerthat was previously accepted. At least some of the making, theaccepting. and the rejecting are performed by the software-based agents.The auction closes when no further offers are made for a specifiedperiod of time.

BRIEF DESCRIPTION OF THE DRAWINGS

The foregoing and further aspects and advantages of the presentinvention will become more apparent from a consideration of thefollowing description, the appended claims, and the accompanyingdrawings in which:

FIG. 1 is a block diagram of a system architecture, wherein a singleonline auction site hosts buyer agents and seller agents, according toan embodiment of the invention;

FIG. 2 is a block diagram of a system architecture, wherein selleragents are hosted on multiple online auction sites and buyer agents arehosted on different computer systems to those that host the selleragents, according to an embodiment of the invention;

FIG. 3 is a block diagram of a system architecture, wherein buyer agentsare hosted on multiple online auction sites and seller agents are hostedon different computer systems to those that host the buyer agents,according to an embodiment of the invention;

FIG. 4 is a flow diagram of an auction mechanism that can be practisedin accordance with embodiments of the invention;

FIG. 5 is a flow diagram of an exemplary auction mechanism that can bepractised with the system architecture of FIG. 1 and FIG. 2;

FIG. 6 is a flow diagram of an exemplary auction mechanism that can bepractised with the system architecture of FIG. 3; and

FIG. 7 is a block diagram of an exemplary computer system with whichembodiments of the invention may be practised.

DETAILED DESCRIPTION AND BEST MODE

The term ‘item’ is intended to represent either a single good, multiplegoods bundled together, a single service, multiple services bundledtogether, or any combination thereof. The term ‘offer’ is intended torepresent the willingness of a seller to sell an item at a specifiedprice.

Software-based agents act on behalf of human participants and may resideon computer systems or on any type of stationary or mobile electronicterminals belonging to buyers, sellers, various third parties (includingpublic servers), commercial service providers or on computer systems ofauction sites. In the case that a software-based agent is not hosted ona bidder's computer system or terminal, the agent is linked to thebidder's computer system or terminal via a communications network.Typical communications networks include various types of wired andwireless networks such as wireless local area network (Wireless LAN),wireless metropolitan area networks (Wireless MAN), satellite, wirelesswide-area networks (satellite based or others), telecommunicationsnetworks, leased lines, virtual leased lines, virtual private networks,intranets, local area networks (LANs), metropolitan area networks (MAN),wide area networks (WAN), Internet or Internet-based networks, and anycombination of the foregoing. In particular, the different buyers'agents may reside at several auction sites, publishing their intent toaccept offers from sellers of a class of items. Similarly, differentsellers' agents may reside on different auction sites, searching forbuyers interested in purchasing their items.

The method, system and computer program product described hereinafterinclude a set of “auction rules” to be followed by multiple buyers andmultiple sellers participating in an auction, a class of “sellerstrategies” to offer items to the buyers, and a class of “buyerstrategies” to decide which offers to accept. As a result of theinteraction of the buyer and seller strategies, the auction mechanismconverges to an allocation of items to buyers at particular prices. Forcertain specific buyer and seller strategies, the resulting allocationand prices have several desirable properties. Firstly, the allocation isnearly an efficient allocation (i.e. the allocation maximizes the totalvalue in the system). Secondly, the prices discovered are close tomaximally competitive prices. The price of an item is maximallycompetitive if there are no other competitive prices for a particularitem that can be increased (A rigorous definition of competitiveequilibrium prices and maximum and minimum competitive equilibriumprices is provided by Lloyd S. Shapley and Martin Shubik in theirarticle entitled “The Assignment Game I: The Core”, InternationalJournal of Game Theory, 1972, 1(2):111-130).

For simplicity of exposition, a generic descending price auctionmechanism for allocating items to buyers and that, with certain specificconditions, leads to nearly efficient allocation of items and fair andcompetitive price discovery is described hereinafter. The describedauction mechanism may advantageously provide sellers with an opportunityto obtain improved prices compared to the prices obtainable in ascendingprice English or other auction mechanisms. For a buyer, the auctionrules advantageously provide the flexibility to reject a previouslyaccepted offer in the event a better offer is received from a differentseller.

In a descending price auction, sellers make offers to buyers that may beaccepted or rejected by the buyers. This auction mechanism assists indiscovering a free and fair competitive equilibrium price that isfavourable to sellers. However, the method, system and computer programproduct disclosed can equally be applied to other auction or negotiationmechanisms. For example, an ascending price auction wherein buyers makeoffers that may be accepted or rejected by sellers.

Consider a scenario with n buyers interested in purchasing items from msellers. For simplicity of exposition, assume that each player isinterested in purchasing at most one item and each seller has exactlyone item to sell. A more general embodiment of the invention, where eachbuyer might be interested in purchasing one or more items and eachseller may have one or more items to sell, is described hereinafter.

Each buyer attaches a value to each item the buyer is interested inpurchasing, which represents the maximum price that the buyer is willingto pay for the item. Similarly, each seller attaches a value to the itemto be sold, which represents the cost incurred by the seller inobtaining the item. The sellers also attach a reserve price for theiritems, which represents the minimum amount a seller expects to receivefor an item. It should be assumed that buyers have enough money/budgetto buy an item from any of the sellers.

Auction Rules

The auction is conducted according to the following rules. The auctionof multiple items by multiple sellers, opens at a pre-specified timewhen all the potential buyers (or the software agents representing thepotential buyers) are expected to be present. A seller (or a softwareagent acting on behalf of a seller) may offer an item to any buyer (orsoftware agent acting on behalf of a buyer) at any price. Buyers cantentatively accept or reject the offer. If a buyer tentatively acceptsan offer, the seller and the buyer are said to be committed to eachother. If a buyer, who is already committed, receives an alternativeoffer that is preferable to the offer already committed to, the buyercan switch from the accepted offer (by rejecting the accepted offer) tothe new offer (by tentatively accepting the new offer). The buyerremains committed in the process whereas the seller of the earlieraccepted offer becomes uncommitted. An offer is binding on the seller.Unlike the buyers, a seller cannot withdraw an offer unless the offerhas been rejected by the buyer. A seller may offer items to buyers onlyif the seller is not committed (i.e. all the seller's earlier offershave been eventually rejected).

An uncommitted seller may withdraw an item from the auction at any pointin time and leave the auction if the seller is unable to sell the itemfor an amount greater than or equal to the reserve price. The auctioncloses either at a specified time or when no more offers are made (i.e.every seller is either committed or has withdrawn their item from theauction). After closing, the committed buyers are obliged to purchasethe item/s from their respective committed sellers at the last offerprices.

Decreasing Price Offer (DPO) Strategy

A seller strategy, called the Decreasing Price Offer (DPO) strategy is ageneralization of a seller's behavior in Dutch auctions. The DPOstrategy is described hereinafter.

Each seller offers an item to the buyers, independently. The sellerbegins with a high initial price and lowers the price by at least aminimum price decrement, as described hereinafter, if there is no demandfor the item. Initially, after the start of the auction, the selleroffers the item to each of the buyers one-by-one at the initial highprice. The order in which the offers are made to the buyers is not fixedand is immaterial. As soon as a buyer accepts the seller's offer, theseller becomes committed and consequently stops offering the item. If acommitted buyer switches from the seller's item, the seller again startsoffering the item at the current price to the remaining buyers. If nobuyer accepts the seller's offer at the current price, the seller lowersthe price by at least the minimum price decrement and re-offers theitem.

Alternatively, a seller may simply announce a price for an item, whichamounts to making an offer to every buyer in the system. Any buyer whodoes not respond to the offer within a specified time period is assumedto have rejected the offer. A buyer who intends to tentatively acceptthe offer is expected to respond to the offer within a specified timeperiod. The seller may arbitrarily select and notify one of the buyerswho tentatively accepted the seller's offer. The buyer that receives theseller's notification becomes committed to the seller. In the event thebuyer was committed earlier, the buyer un-commits from the previousseller by way of sending a notification. The consequently uncommittedseller then re-offers the item at the same price to ascertain whetherany other buyer is interested in the offer. If the offer is not acceptedwithin a fixed time period, the seller lowers the price by the minimumprice decrement and re-offers the item at the reduced price. For eachseller, this process continues until there is either a committed buyerand the auction ends, or the price reaches the reserve price and theseller withdraws the item and leaves the auction.

A seller may set a reserve price that is different to the seller'svaluation of an item. If a seller wants a minimum surplus t, the sellerwill set a reserve price r that gives the seller a surplus of t. Ingeneral, a seller's reserve price will increase as the seller's minimumsurplus increases. A Decreasing Price Offer (DPO) strategy followed bythe seller of an item is denoted as DPO(t) if the seller's minimumsurplus amount is t. For instance, when the seller's surplus is linearin price, surplus s is given by the equation s=p−v where v is theseller's valuation of the item (cost of securing the item) and p is theprice at which the seller is able to sell the item. In this case, thereserve price for a minimum surplus amount t is given by p_(r)=v+t. If aseller sets a reserve price p_(r) equal to the seller's valuation v,then the corresponding surplus t=0 and the corresponding DPO strategy isDPO(0). Thus, DPO generally refers to a class of strategies withdifferent minimum surplus amounts.

Local Surplus Increasing (LSI) Strategy

An initial surplus amount s is associated with each buyer. If a buyer isnot committed to any item, the buyer accepts any offer that provides atleast surplus s. However, even if already committed to an offer, thebuyer accepts any other offer of an item that provides a greater surplusthan the surplus provided by the item already committed to. By followingthis strategy, a buyer's surplus is always increased by positive amountswith every subsequent offer accepted. This strategy is denoted as aLocal Surplus Increasing (LSI) strategy. More specifically, if a buyerhas an initial surplus amount s, the strategy is denoted as LSI(s). Ifs=0, then the corresponding strategy of the buyer is LSI(0). Thus, LSIgenerally refers to a class of strategies with different initial surplusamounts.

In general, a buyer's surplus on an item is a decreasing function of theprice at which the item is bought. For instance, if the buyer surplus(denoted as s) is linear in the price then the buyer surplus on an item,at a time t, is given by the equation s=v−p _(t), where v is the buyer'svaluation of the item, and p_(t) is the item's price at time t.

According to LSI strategy, a buyer can never be committed to more thanone offer at the same time during the auction. As soon as a buyerreceives an offer that provides an increased surplus, the buyerun-commits from the current offer and accepts the new offer. Offers thatprovide a lower surplus than a current surplus are rejected while abuyer waits for item prices to fall. Thus, buyers are guaranteed toobtain a surplus at least equal to the buyer's initial surplus, providedan offer is accepted and an item is secured.

Specific Embodiments of Single and Multiple Online Auction Sites

FIG. 1 is a block diagram showing an embodiment of a single onlineauction site 150 that hosts buyer agents 110, 111, . . . 110+n,representing buyers 100, 101, . . . 100+n, respectively, and selleragents 120, 121, . . . 120+m representing sellers 130, 131, . . . 130+m,respectively. The buyer and seller agents are typically implemented insoftware for execution on the computer hardware of an online auctionsite.

FIG. 2 is a block diagram showing an alternative embodiment wherein thesellers 130, 131, . . . 130+m list items for auction on different onlineauction sites 150 and 151. The number of online auction sites is notlimited to two, however, and may extend to any convenient number. Theauction sites 150 and 151 also host the software-based seller agents120, 121, . . . 120+m, which represent the sellers 120, 121, . . .120+m, respectively. The buyers 100, 101, . . . 100+n are represented bythe buyer agents 110, 111, . . . 110+n, respectively, which may behosted on the online auction sites 150 and 151, a buyer's InternetService Provider's (ISP's) computer, or a buyer's Personal Computer (PC)or Personal Digital Assistant (PDA).

FIG. 3 is a block diagram showing an alternative architecture to FIG. 2wherein the buyers 100, 101, . . . 100+n announce their intention topurchase an item and request quotations (invite offers) from prospectivesellers 130, 131, . . . 130+m. The request for quotations is publishedon online auction sites 150 and 151. The number of online auction sitesis not limited to two, however, and may extend to any convenient number.The online auction sites 150 and 151 also host the buyer agents 110,111, . . . 110+n that represent the buyers 100, 101, . . . 100+n,respectively. Alternatively, the buyer agents 110, 111, . . . 110+n maybe hosted on a seller's Internet Service Provider's (ISP's) computer oron a seller's Personal Computer (PC) or Personal Digital Assistant(PDA).

Generic Descending Price Auction Algorithm

FIG. 4 is a flow diagram of a generic descending price auction mechanismthat can be practised in accordance with different embodiments of theinvention.

The buyer agents 110, 111, . . . 110+n follow a Local Surplus Increasing(LSI) strategy on behalf of their respective buyers 110, 111, . . .110+n. The seller agents 120, 121, . . . 120+m follow a Decreasing PriceOffer (DPO) strategy on behalf of their respective sellers 130, 131, . .. 130+m.

At step 410, the auction opens. Next, at step 420, each respectiveseller agent 120, 121, . . . 120+m sets an initial high price on theseller's item. At step 430, one or more seller agents 120, 121, . . .120+m offer their item/s at the current price/s to the interested buyeragents 110, 111, . . . 110+n.

Upon receipt of an offer from a seller agent 120, 121, . . . 120+m, eachbuyer agent 110, 111, . . . 110+n decides whether to accept or rejectthe offer at decision step 440. This decision is made by the buyeragents 110, 111, . . . 110+n in accordance with an LSI strategy andinformation relating to the perceived value of the item and the initialsurplus amount as specified by the respective buyers 100, 101, . . .100+n.

If a seller agent's offer is accepted (Y) by any of the buyer agents110, 111, . . . 110+n, at decision step 440, and the buyer switches froman earlier accepted offer (Y), at conditional step 450, the buyerrejects the earlier offer at step 460 and processing continues at step470.

For the case of a buyer agent 110, 111, . . . 110+n that accepted anoffer (Y), at decision step 440, and that did not accept an earlieroffer, the condition of step 450 cannot not be satisfied. In this case,processing continues at decision step 4A0, where auction closingconditions are checked.

If a seller agent's offer is not accepted (N) by any of the buyer agents110, 111, . . . 110+n, at decision step 440, the seller agent 120, 121,. . . 120+m reduces the price of the rejected item by at least aspecified minimum price decrement, at step 470.

At condition step 480, the seller agent 120, 121, . . . 120+m determineswhether the reserve price of the item has been reached. This conditioncheck is performed according to the DPO strategies describedhereinbefore. If the reserve price has been reached (Y), the selleragent 120, 121, . . . 120+m withdraws the item from auction at step 490and leaves the auction. If the auction closing conditions are met, atcondition step 4A0, the auction closes at step 4B0. The auction closingconditions are checked according to the auction rules describedhereinbefore.

If reserve price has not been reached (N), at condition step 480, or theauction closing conditions are not met (N), at condition step 4A0,processing reverts to step 430, where one or more uncommitted selleragents 120, 121, . . . 120+n offer their item/s to interested buyeragents 110, 111, . . . 110+n, at the current prices of the item/s.

Embodiments Employing the Generic Auction Algorithm

FIG. 5 is a flow diagram of an exemplary auction mechanism that can bepractised with the system architecture of FIG. 1 and FIG. 2.

At step 510, the sellers 130, 131, . . . 130+m list items for sale ononline auction web site/s 150, 151, . . . . using conventional methodspractised in online auction sites. A seller may do this by running aworld-wide-web browser such as Netscape™ Communicator Version 4.7 on apersonal computer (PC) with a modem, connected to the Internet using theservices of an Internet Service Provider (ISP). The online auction sites150, 151, . . . , may be implemented using a server hardware system suchas RS/6000™, AS/400™ etc., connected to the Internet using services ofan ISP. The server hardware system typically runs a commerce-serversoftware such as IBM™ Websphere Commerce Suite Version 5.1 by means ofwhich the auction mechanism, sellers agents 120, 121, . . . 120+m, andthe buyer agents 110, 111, . . . 110+n, can be implemented.

At step 520, the sellers 130, 131, . . . 130+m instruct their respectiveagents 120, 121, . . . 120+m, by filling out forms displayed in theirweb-browsers, which originate from a commerce server running at theonline auction sites 150, 151, . . . . The seller's instructions includeinformation in respect of each item for sale, such as reserve price,initial offer price and a minimum price decrement. This information ispassed to the seller agents 120, 121, . . . 120+m, implemented by way ofa commerce server at an online auction site 150, 151, . . . .

When a buyer 100, 101, . . . 100+n (typically using a web-browser and apersonal computer connected to the Internet) arrives at an auction website 150, 151, . . . , the buyer searches for items of interest(typically by following appropriate “hyperlinks” and/or by filling outappropriate forms). If a buyer 100, 101, . . . 100+n finds an item ofinterest (Y), at condition step 530, the buyer 100, 101, . . . 100+ninstructs a respective buyer agent 110, 111, . . . 110+n, at step 540.The buyer's instructions include information such as identification ofitems of interest to the buyer, the buyer's valuation/s of the item/s ofinterest, and an initial surplus amount in respect of each item.

If a buyer agent 110, 111, . . . 110+n is hosted at an auction site, asshown in FIG. 1, then the buyer agent can be implemented using thecommerce server software running on the auction site hardware. In thiscase, the buyers 100, 101, . . . , 110+n provide instructions to theirrespective agents 110, 111, . . . 110+n, by filling out appropriateforms displayed on the buyers' web-browsers.

If the buyer agents 110, 111, . . . 110+n, are hosted elsewhere (say atbuyer's personal computer), as shown in FIG. 2, then the agent can beimplemented as a software using a generic programming language such asC/C++/Java/Perl etc. In this case, the buyer instructs its agent bygiving appropriate input to the agent software running on the buyer'sPC.

Thereafter, the buyer's agent contacts the relevant seller's agent,either directly (in case of FIG. 1), or using a communication network(in case of FIG. 2), at step 550. Processing continues at condition step560, where it is determined whether it is time for the auction to begin.

If no buyer 100, 101, . . . 100+n finds an item of interest (N), atcondition step 530, processing continues at condition step 560, where itis determined whether it is time for the auction to begin.

If it is not yet time for the auction to begin (N), at condition step560, processing reverts to condition step 530, thus permittingadditional buyers to join the auction. The start time of the auction istypically specified by the auctioneer.

When the start time of auction is reached (Y), at condition step 560,processing continues at step 410 of the generic auction algorithm ofFIG. 4. When the generic auction algorithm of FIG. 4 ends after auctionclosing, at step 4B0 of FIG. 4, processing returns to step 570 of FIG.5. At step 570, all the committed buyers and sellers transact inaccordance with the offers committed to.

FIG. 6 is a flow diagram of an exemplary auction mechanism that can bepractised with the system architecture of FIG. 3.

At step 610, the buyers 100, 101, . . . 100+n list their intention topurchase one item from a specific class of items (e.g. used cars,airline tickets, hotel accommodation etc.) on online auction sites 150,151, . . . and invite offers (request quotations) from the prospectivesellers 130, 131, . . . 130+m. The buyers may follow conventionalmethods of web-browsing to list their intent to purchase. Theinvitations are published on online auction web sites 150, 151, . . . .

A buyer 100, 101, . . . 100+n can list an intention to purchase an itemon an online auction site 150, 151, . . . using a world-wide-web browseron a personal computer (PC) with a modem, connected to the Internetusing the services of an ISP. An online auction site 150, 151, . . . maybe implemented using a server hardware system such as RS/6000™, AS/400™etc., connected to the Internet using services of an ISP. The serverhardware system typically runs a commerce-server software such as IBM™Websphere Commerce Suite Version 5.1 by means of which the auctionmechanism, seller agents 130, 131, . . . 130+m, and buyer agents 110,111, . . . 110+n can be implemented.

At condition step 620, a seller 130, 131, . . . 130+m browses theauction sites 150, 151, . . . typically using a world-wide-web browseron a personal computer (PC) with a modem connected to the Internet, tofind buyers that may be interested in an item the seller wishes to sell.If the seller finds one more buyers 100, 101, . . . 100+n that may beinterested in the item (Y), the seller 130, 131, . . . 130+m instructs arespective seller agent 120, 121, . . . 120+m, at step 630. The seller'sinstructions include information relating to specifications of the itemof interest, an initial price for the item, a reserve price for theitem, a minimum price decrement in respect of the item, and a list ofbuyer agents 110, 111, . . . 110+n corresponding to the buyersinterested in the item.

If the seller agents 120, 121, . . . 120+m, are hosted at an auctionsite, then the seller agents can be implemented using the commerceserver software. In this case a seller 130, 131, . . . 130+m, providesinstructions to a respective agent by filling out an appropriate formdisplayed on the seller's web-browser.

If the seller agents 120, 121, . . . 120+m, are hosted elsewhere (say,on a seller's personal computer), then the agents can be implemented insoftware, using a generic programming language such as C/C++/Java/Perletc. In this case, a seller 130, 131, . . . 130+m instructs a respectiveagent by providing appropriate input to the agent software running onthe seller's PC.

Once a seller agent 120, 121, . . . 120+m has been instructed at step630, the seller agent sends the item specifications to the interestedbuyer agents 110, 111, . . . 110+n, at step 640. The item is typicallyoffered to each buyer agent 110, 111, . . . 110+n, individually.

When a buyer agent 110, 111, . . . 110+n receives an item specificationfrom seller agent 120, 121, . . . 120+m, the buyer agent 110, 111, . . .110+n notifies the respective buyer 100, 101, . . . 100+n of thespecification of the item, at step 650. The buyer agent typicallynotifies the corresponding buyer 100, 101, . . . 100+n, either bysending an email to the buyer's email address, or by listing the itemspecifications on the web-page corresponding to the buyer's listedintention to purchase.

The buyers 100, 101, . . . 100+n evaluate the item specification andinstruct the respective buyer agents 110, 111, . . . 110+n, typicallyusing a personal computer connected to the Internet, at step 660. Thebuyers' instructions include information regarding the buyers' valuationof the item and an initial surplus amount for the item.

At condition step 670, the software at the online auction site 150, 151,. . . determines whether the start time of the auction has been reached.If the start time has not yet been reached (N), processing reverts tocondition step 620, thus permitting additional sellers 130, 130, . . .130+m to join the auction.

If the start time of auction has been reached (Y), at condition step670, processing continues at step 410 of the generic auction algorithmof FIG. 4. When the generic auction algorithm of FIG. 4 ends afterauction closing, at step 4B0 of FIG. 4, processing returns to step 680of FIG. 6. At step 680, all the committed buyers and sellers transact inaccordance with the offers committed to.

If a seller 130, 131, . . . 130+m, is unable to find a buyer 100, 101, .. . 100+n interested in his item (N), at condition step 620, the sellerleaves the auction site and processing continues at condition step 670.

Generalization to Combined Diverse Seller and Buyer Methodologies

In practice, a combination of the architectures shown in FIGS. 2 and 3may arise. Some of the sellers 130, 131, . . . 130+m might make theiroffers known by listing their items on known online auction sites 150and 151. The number of online auction sites is not limited to two,however, and may extend to any convenient number. The online auctionsites 150 and 151 also host the seller agents 130, 131, . . . 130+m,which follow a DPO strategy. Some other of the sellers 130, 131, . . .130+m may search the communication network (Internet) for buyers 100,101, . . . 100+n interested in their offers and send them offersindividually. The agents of such buyers are typically hosted on thebuyer's own personal computer systems or a computer system of thebuyer's Internet Service Provider (ISP).

Similarly, some of the buyers 100, 101, . . . 100+n might make theirintention to purchase an item, and request for offers, known on onlineauction sites 150 and 151. The auction sites 150 and 150 also typicallyhost the software agents 110, 111, . . . 110+n of the buyers 100, 101, .. . 100+n, which follow an LSI strategy. Some of the other buyers 100,101, . . . 100+n may search the communication network (Internet) foropen offers and monitor item/s of interest, as the price/s of the item/sreduce, and follow an LSI strategy in accepting the offers.

Generalization to Multiple Heterogeneous Items

A buyer 100, 101, . . . 100+n may be interested in purchasing more thanone item. Accordingly, a buyer 100, 101, . . . 100+n may accept morethan one offer and may thus have more than one accepted offer at anygiven time. In this case, the buyer 100, 101, . . . 100+n informs arespective buyer agent 110, 111, . . . , 110+n about the buyer'spreferences. A buyer agent 110, 111, . . . 110+n accepts a new offer ifthe new offer increases the total surplus of the buyer. Alternatively, abuyer agent 110, 111, . . . 110+n may accept a new offer and un-commitfrom one or more tentatively accepted offers, if doing so increases thebuyer's surplus.

A seller 130, 131, . . . 130+m may have more than one item for sale. Inthis case, the seller 130, 131, . . . 130+m instructs the correspondingagent 120, 121, . . . 120+m, accordingly. A seller agent 120, 121, . . .120+m either offers the items one-by-one or offers all of the items allat once.

Computer Implementation

The auction mechanism/s and/or software-based agents for bidding mayeither be implemented as a standalone program running on the user'scomputer (client-side agents), subroutines that are a part of theauction web site (server-side agents) or as a software code whichexecutes on a generic public infrastructure such as compute servers(third party agents).

The auction mechanism/s and/or software-based agents can be implementedusing one or more computer program product/s in conjunction with acomputer system 700 as shown in FIG. 7. In particular, the auctionmechanism/s and/or software-based agents can be implemented as software,or computer readable program code, executing on the computer system 700.The computer system 700 may comprise any commercially available computersystem interconnected over a communication network. Examples of computersystems include personal computers (PCs) and servers like Netfinity™ andRS/6000™, AS/400™, S/390™ etc. sold by IBM™ and similar such serverssold by other companies.

The computer system 700 includes a computer 750, a video display 710,and input devices 730, 732. In addition, the computer system 700 canhave any of a number of other output devices including line printers,laser printers, plotters, and other reproduction devices connected tothe computer 750. The computer system 700 can be connected to one ormore other computers via a communication interface 764 using anappropriate communication channel 740 such as a modem communicationspath, an electronic network, or the like. The network may include alocal area network (LAN), a wide area network (WAN), an Intranet, and/orthe Internet 720.

The computer 750 includes a control module 766, a memory 770 that mayinclude random access memory (RAM) and read-only memory (ROM), aninput/output (I/O) interface 772, a video interface 760, and one or morestorage devices generally represented by the storage device 762. Thecontrol module 766 is implemented using a central processing unit (CPU)that executes or runs a computer readable program code that performs aparticular function or related set of functions.

The video interface 760 is connected to the video display 710 andprovides video signals from the computer 750 for display on the videodisplay 710. User input to operate the computer 750 can be provided byone or more of the input devices 730, 732 via the I/O interface 772. Forexample, a user of the computer 750 can use a keyboard as input device730 and/or a pointing device such as a mouse 732. The keyboard 730 andthe mouse 732 provide input to the computer 750. The storage device 762can consist of one or more of the following: a floppy disk, a hard diskdrive, a magneto-optical disk drive, CD-ROM, magnetic tape or any otherof a number of non-volatile storage devices well known to those skilledin the art. Each of the elements in the computer system 750 is typicallyconnected to other devices via a bus 780 that in turn can consist ofdata, address, and control buses.

The method steps for the auction mechanism/s and/or the software-basedagents can be effected by instructions in the software that are carriedout by the computer system 700. Again, the software may be implementedas one or more modules for implementing the method steps.

In particular, the software may be stored in a computer readable medium,including the storage device 762 or that is downloaded from a remotelocation via the communication interface 764 and communications channel740 from the Internet 720 or another network location or site. Thecomputer system 700 includes the computer readable medium having suchsoftware or program code recorded such that instructions of the softwareor the program code can be carried out.

The computer system 700 is provided for illustrative purposes and otherconfigurations can be employed without departing from the scope andspirit of the invention. The foregoing is merely an example of the typesof computers or computer systems with which the embodiments of theinvention may be practised. Typically, the processes of the embodimentsare resident as software or a computer readable program code recorded ona hard disk drive as the computer readable medium, and read andcontrolled using the control module 766. Intermediate storage of theprogram code and any data including entities, tickets, and the like maybe accomplished using the memory 770, possibly in concert with thestorage device 762.

In some instances, the program may be supplied to the user encoded on aCD-ROM or a floppy disk (both generally depicted by the storage device762), or alternatively could be read by the user from the network via amodem device connected to the computer 750. Still further, the computersystem 700 can load the software from other computer readable media.This may include magnetic tape, a ROM or integrated circuit, amagneto-optical disk, a radio or infra-red transmission channel betweenthe computer and another device, a computer readable card such as aPCMCIA card, and the Internet 720 and intranets including emailtransmissions and information recorded on Internet sites and the like.The foregoing are merely examples of relevant computer readable media.Other computer readable media may be practised without departing fromthe scope and spirit of the invention.

The auction mechanism/s and/or software-based agents can be realised ina centralized fashion in one computer system 700, or in a distributedfashion where different elements are spread across severalinterconnected computer systems.

Computer program means or computer program in the present context meanany expression, in any language, code or notation, of a set ofinstructions intended to cause a system having an information processingcapability to perform a particular function either directly or aftereither or both of the following: a) conversion to another language, codeor notation or b) reproduction in a different material form.

Communication Network Implementation

A typical communication network may include any of nodes(routers/switches/hubs, satellite transponders, etc.), end-systems (suchas computers, PDAs, mobile phones etc.), links (wired or wireless suchas optical fiber, telecommunication lines, Ethernet cables, WLAN,infra-red links, microwave links, satellite links etc.) that provide acommunication path from one node to one or more nodes/end-systems andfrom one end system to one or more nodes/end-systems.

Incorporations by Cross-Reference

“Simultaneous Online Independent Auctions with Discrete Bid Increments”,by Bansal V. and Garg R., yet to be published in the Electronic CommerceResearch Journal, is hereby incorporated herein in its entirety andaccompanies this specification.

“Descending Price Multi-item Auctions”, a confidential IBM InternalReport by Garg R. and Mishra D., is hereby incorporated herein in itsentirety and accompanies this specification.

In the foregoing, a method, a system, and a computer program product foronline auction of multiple heterogeneous items using software-basedagents are described. While only a small number of embodiments aredescribed, it will be apparent to those skilled in the art in view ofthis disclosure that numerous changes and/or modifications can be madewithout departing from the scope and spirit of the invention.

1. A method for conducting an auction of a plurality of heterogeneousitems, said method comprising: making, by offering parties, offers topotential accepting parties for said heterogeneous items, wherein saidmaking begins at a specified time with at least some of said potentialaccepting parties and at least some of said offering parties representedby software-based agents hosted on terminals connected via acommunication network, and wherein any acceptance by any accepting partyof any offer from any offering party is binding on said any offeringparty immediately, but is not binding on said any accepting party untilsaid auction closes such that said method further comprises: accepting,by an accepting party, a first offer from a first offering party for oneof said heterogeneous items only if said first offer provides a surplusof at least a minimum surplus amount for said one of said heterogeneousitems; after said accepting of said first offer, receiving, by saidaccepting party from a second offering party different from said firstoffering party, a subsequent offer for said one of said heterogeneousitems, wherein said subsequent offer is different from said first offerand provides an increased surplus for said one of said heterogeneousitems compared to said surplus provided by said first offer; accepting,by said accepting party, said subsequent offer; and rejecting, by saidaccepting party, said first offer that was previously accepted, whereinat least some of said making, said accepting, and said rejecting areperformed by said software-based agents and wherein said auction closeswhen no further offers are made for a specified period of time.
 2. Themethod according to claim 1, all the limitations of which areincorporated herein by reference, wherein said surplus is a function ofa current price of said item.
 3. The method according to claim 1, allthe limitations of which are incorporated herein by reference, whereinsaid making, by said offering parties, said offers comprises: making aninitial offer to purchase said one of said heterogeneous items at aspecified initial price; making another offer to purchase said one ofsaid heterogeneous items at an increased price if said initial offer isnot accepted within a specified period of time and if said increasedprice is less than a specified maximum price.
 4. The method according toclaim 3, all the limitations of which are incorporated herein byreference, wherein said another offer is further made if said initialoffer is rejected by each party said initial offer was made to.
 5. Themethod according to claim 1, all the limitations of which areincorporated herein by reference, further comprising, before saidaccepting of any of said offers by an agent of said accepting party,receiving by said agent of instructions regarding said heterogeneousitems from said accepting party.
 6. A method for conducting an auctionof a plurality of heterogeneous items, said method comprising the stepsof: making, by offering parties, offers to potential accepting partiesfor said heterogeneous items, wherein said making begins at a specifiedtime with at least some of said potential accepting parties and at leastsome of said offering parties represented by software-based agentshosted on terminals connected via a communication network, and whereinany acceptance by any accepting party of any offer from any offeringparty is binding on said any offering party immediately, but is notbinding on said any accepting party until said auction closes such thatsaid method further comprises: accepting, by an accepting party, a firstoffer from a first offering party for one of said heterogeneous itemsonly if said first offer provides a surplus of at least a minimumsurplus amount for said one of said heterogeneous items; after saidaccepting of said first offer, receiving, by said accepting party from asecond offering party different from said first offering party, asubsequent offer for said one of said heterogeneous items, wherein saidsubsequent offer is different from said first offer and provides anincreased surplus for said one of said heterogeneous items compared tosaid surplus provided by said first offer; accepting, by said acceptingparty, said subsequent offer; and rejecting, by said accepting party,said first offer that was previously accepted, wherein at least some ofsaid making, said accepting, and said rejecting are performed by saidsoftware-based agents acting on behalf of said accepting parties andsaid offering parties, based on specific instructions from saidaccepting parties and said agents regarding said heterogeneous items,and wherein said auction closes when no further offers are made for aspecified period of time.
 7. The method according to claim 6, all thelimitations of which are incorporated herein by reference, wherein saidsurplus is a function of a current price of said one of saidheterogeneous items.
 8. The method according to claim 6, all thelimitations of which are incorporated herein by reference, wherein saidauction starts at a specified time and closes when no further offers aremade for a specified period of time.
 9. The method according to claim 6,all the limitations of which are incorporated herein by reference,wherein said making, by said offering parties, said offers comprises:making an initial offer to purchase said one of said heterogeneous itemsat a specified initial price; making another offer to purchase said oneof said heterogeneous items at an increased price if said initial offeris not accepted within a specified period of time and if said increasedprice is less than a specified maximum price.
 10. The method accordingto claim 9, all the limitations of which are incorporated herein byreference, wherein said another offer is further made if said initialoffer is rejected by each party said initial offer was made to.
 11. Amethod for conducting an auction of a plurality of heterogeneous items,said method comprising the steps of: making, by offering parties, offersto potential accepting parties for said heterogeneous items, whereinsaid making begins at a specified time with at least some of saidpotential accepting parties and at least some of said offering partiesrepresented by software-based agents hosted on terminals connected via acommunication network, and wherein any acceptance by any accepting partyof any offer from any offering party is binding on said any offeringparty immediately, but is not binding on said any accepting party untilsaid auction closes such that said method further comprises: accepting,by an accepting party, a first offer from a first offering party for oneof said heterogeneous items only if said first offer provides a surplusof at least a minimum surplus amount for said one of said heterogeneousitems; after said accepting of said first offer, receiving, by saidaccepting party from a second offering party different from said firstoffering party, a subsequent offer for said one of said heterogeneousitems, wherein said subsequent offer is different from said first offerand provides an increased surplus for said one of said heterogeneousitems compared to said surplus provided by said first offer; accepting,by said accepting party, said subsequent offer; and rejecting, by saidaccepting party, said first offer that was previously accepted, whereinat least some of said making, said accepting, and said rejecting areperformed by said software-based agents, wherein said auction closeswhen no further offers are made for a specified period of time, andwherein said making, by said offering parties, said offers comprises:making an initial offer to purchase said one of said heterogeneous itemsat a specified initial price; and making another offer to purchase saidone of said heterogeneous items at an increased price if said initialoffer is not accepted within a specified period of time and if saidincreased price is less than a specified maximum price.
 12. The methodaccording to claim 11, all the limitations of which are incorporatedherein by reference, wherein said surplus is a function of a currentprice of said one of said heterogeneous items.
 13. The method accordingto claim 11, all the limitations of which are incorporated herein byreference, wherein said auction starts at a specified time and closeswhen no further offers are made for a specified period of time.
 14. Themethod according to claim 11, all the limitations of which areincorporated herein by reference, further comprising, before saidaccepting of any of said offers by an agent of said accepting party,receiving by said agent of instructions for said heterogeneous itemsfrom said accepting party.
 15. The method according to claim 11, all thelimitations of which are incorporated herein by reference, wherein saidanother offer is further made if said initial offer is rejected by eachparty said initial offer was made to.